Modvat credit on pre-cut-off duty-paid inputs denied where the scheme had to be read as an integrated whole.

Modvat credit was confined by the scheme's integrated rules and could not be claimed by reading Rule 57A in isolation from Rule 57H. Inputs that had already suffered duty before the Modvat cut-off date of 31-1-1986 were outside the intended benefit, particularly where the goods were received much later under subsidiary gate passes. On that reasoning, credit on the disputed inputs was disallowed and the assessee's claim failed.

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Issues: Whether Modvat credit was admissible on inputs that had suffered duty before 31-1-1986, when the declaration had been filed under Rule 57G and the goods were received under subsidiary gate passes.

Analysis: The Modvat scheme was held to consist of several interrelated rules and had to be read as a whole. Credit on inputs already in stock or moving through the market before the introduction of Modvat was restricted by the prescribed cut-off date of 31-1-1986. Since the inputs in question had suffered duty in 1984 and were received only after a considerable time, the benefit could not be extended by reading Rule 57A in isolation from Rule 57H.

Conclusion: Modvat credit was not admissible on the disputed inputs, and the disallowance was upheld against the assessee.

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